Westpac cuts 1 year fixed home loan rate to 3.99%

Friday 07 April 2017

Article by Kelly Emmerton

Despite being one of many lenders who lifted variable rates across its home loan products, this week big bank Westpac reduced its short term fixed home loan rate to just 3.99% p.a.

Westpac cuts 1 year fixed home loan rate to 3.99%

The one year fixed term on Westpac’s Fixed Options Home Loan Premier Advantage Package now comes with a 3.99% interest rate and a comparison rate of 4.77% for borrowers making principal and interest repayments.

This represents a considerable drop of 40 bp, from the previous rate of 4.39%.

A number of other changes were made by Westpac, including:
  • One year fixed rate, interest only loans decreased by 23 bp to 4.16% (4.94% comparison rate)
  • One year fixed rate, principal and interest investment loans decreased by 47 bp to 4.19% (5.25% comparison rate)
  • One year fixed rate, interest only investment loans decreased by 30 bp to 4.36% (5.41% comparison rate)
  • For all other fixed terms, interest only investment loans increased by 17 bp

Although this is good news for borrowers looking to lock in short-term, Mozo Data Manager Peter Marshall said that with an RBA rate hike tipped for sometime in 2018 or even as early as October this year, those taking up short term offers at the moment should be cautious.

“If you’re going to take up a short term fixed rate offer like this, just be aware that in a year or two, rates could have increased considerably. You might finish your fixed term, only to find your new interest rate is much higher than you’ve grown used to,” he said.

Borrowers should plan for when their fixed rate term ends by establishing whether or not their budget can handle higher repayments, Marshall says.

For example, on a home loan of $800,000 over a period of 30 years, a borrower paying 3.99% interest would repay $3,817 each month. A rate increase of 0.25% - not unrealistic, since many lenders recently hiked variable rates by that much or more - would mean making repayments of $3,933.

“So, while this may be a great offer for some borrowers, it’s important to ask yourself whether your monthly budget can spare an extra hundred dollars when the short fixed term is over,” Marshall said.

Best fixed rate home loan terms

  • 1 year - 3.59% - Greater Bank (comparison rate: 4.42%)
  • 3 year - 3.59% - Easy Street (comparison rate: 4.01%)
  • 4 year - 3.75% - BCU (comparison rate: 4.24%)
  • 5 year - 4.10% - BCU (comparison rate: 4.37%)

To compare the rest of the home loan market, head over to our mortgage comparison tool. And if you want to crunch the numbers to see if your budget could handle a rate hike, check out our rate change calculator.

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